Stock A has a standard deviation of 20 percent per year and stock B has a standard deviation of 15 percent per year.The correlation between stock A and stock B is .35.You have a portfolio of these two stocks wherein stock B has a portfolio weight of 40 percent.What is your portfolio variance?
A) 0.02022
B) 0.02156
C) 0.02239
D) 0.02247
E) 0.02304

Question

Quizplus · Accepted Answer

Var_Port = [(1 - 0.40)² × 0.20²] + [0.40² × 0.15²] + [2 × (1 - 0.40) × 0.40 × 0.20 × 0.18 × 0.35] = 0.02304

Stock a Has a Standard Deviation of 20 Percent Per